{"id":894456,"date":"2018-06-28T10:18:31","date_gmt":"2018-06-28T16:18:31","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=894456"},"modified":"2018-06-28T10:18:31","modified_gmt":"2018-06-28T16:18:31","slug":"conditions-precedents-in-construction-contracts","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/conditions-precedents-in-construction-contracts\/","title":{"rendered":"Conditions Precedents in Construction Contracts"},"content":{"rendered":"

Kenneth M. Block and Joshua M. Levy | New York Law Journal<\/a> | June 19, 2018<\/p>\n

In their Construction Law column, Kenneth Block and Joshua Levy explore the differences between typical contract terms and those that rise to the level of conditions precedent, the latter requiring strict compliance to avoid forfeiture.<\/h4>\n

Given the fast-paced nature of most construction projects in New York City, strict compliance with the minute details of each contract clause often falls low on the list of the parties\u2019 priorities. Although the parties can often fulfill their obligations through substantial compliance with an agreement\u2019s terms, under certain circumstances, even a minor deviation from the contract\u2019s requirements can forfeit a party\u2019s rights or benefits.<\/p>\n

In a prior article, we discussed conditions precedent in the context of notice provisions, but conditions precedent can operate in any form. (See,<\/em>\u00a0Kenneth M. Block,\u00a0Enforcement of Notice Provisions<\/em>\u00a0NYLJ, Sept. 11, 2013, p. 5, col. 2). In the context of construction, provisions related to defective work, change orders, dispute resolution and delay claims are often drafted as conditions precedent. This article will explore the differences between typical contract terms and those that rise to the level of conditions precedent, the latter requiring strict compliance to avoid forfeiture.<\/p>\n

Conditions Precedent<\/strong><\/h3>\n

A condition precedent is \u201can event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.\u201d\u00a0Merritt Hill Vineyards v. Windy Heights Vineyard<\/em>, 460 N.E.2d 1077 (1984). Conditions precedent are distinguishable from promises as conditions precedent contain language that mandates strict performance and sets forth clear consequences for noncompliance.\u00a0Barsotti\u2019s, Inc. v. Consol. Edison Co. of New York<\/em>, 680 N.Y.S.2d 88, 89 (1st Dep\u2019t 1998). While New York contract law requires the breach of a promise to be material or prejudicial to release a non-breaching party from its duties under the agreement or forfeit the breaching party\u2019s rights, conditions precedent \u201cmust be literally performed; substantial performance will not suffice.\u201dMHR Capital Partners v. Presstek<\/em>, 912 N.E.2d 43, 47 (2009). Failure to comply strictly with the requirements of a condition precedent functions as a waiver of the right or obligation the condition preceded.\u00a0Kingsley Arms v. Sano Rubin Const. Co.<\/em>, 791 N.Y.S.2d 196 (3d Dept. 2005). (It should be noted that, pursuant to CPLR 3015(a), when a defense to an action is based on the failure to comply with a condition precedent, the denial of performance \u201cshall be made specifically and with particularity.\u201d)<\/p>\n

Applications of New York Law<\/strong><\/h3>\n

In\u00a0Archstone v. Renval<\/em>, a developer sued its contractor over a deposit demanded by the contractor and which the developer claimed was paid under duress.\u00a0Archstone Dev. v. Renval Constr.<\/em>, 156 A.D.3d 432 (1st Dept. 2017). The governing contract was AIA Document A201-2007 that required mediation \u201cas a condition precedent to binding dispute resolution.\u201d The First Department upheld the lower court\u2019s dismissal of the action without addressing the merits of the case simply because the developer failed to seek mediation. Despite the developer\u2019s substantial compliance with all the other conditions precedent to the claim, its failure to seek mediation did not meet the requirement of strict performance and the clear consequence set forth in the contract was the developer\u2019s inability to maintain the court action.<\/p>\n

Likewise, in\u00a0Schindler Elevator v. Tully Construction<\/em>, a subcontractor brought suit against a contractor for delay damages it incurred in performance of its work.\u00a0Schindler Elevator Corp. v. Tully Const. Co.<\/em>, 30 N.Y.S.3d 707, 709 (2d Dept.\u00a02016). The relevant subcontract required the subcontractor to submit \u201cwithin forty-five (45) days\u2026and every thirty (30) days thereafter\u2026verified statements of the details and amounts of such damages, together with documentary evidence of such damages\u201d further stating that failure \u201cto strictly comply with the requirements\u2026shall be deemed a conclusive waiver\u2026of any and all claims for damages for delay\u2026\u201d Although the subcontractor produced letters and e-mails it had sent the contractor making the contractor aware of the delay claims, the communications did not contain verified statements nor were they supported by documentary evidence of the damages. Accordingly, the Second Department overturned the lower court\u2019s dismissal of the contractor\u2019s motion for summary judgment and dismissed the subcontractor\u2019s claim. Having failed to comply strictly with the condition precedent, the subcontractor effectively waived its right to claim damages for the delays.<\/p>\n

By contrast, in\u00a0Facilities Development v. Nautilus Construction<\/em>, a surety appealed the dismissal of its motion for summary judgment to dismiss an action by an owner on the grounds that the owner\u2019s failure to require its contractor to obtain fire insurance prior to the start of work was a condition precedent to the performance bond\u2019s payment.\u00a0Facilities Dev. Corp. v. Nautilus Const. Corp.<\/em>, 550 N.Y.S.2d 127 (3d Dept. 1989). While the contract did require the contractor to obtain fire insurance, no conditional language was used nor any consequence for failure provided. The court held that the fire insurance requirement could not be construed as a condition precedent as it was just \u201cone provision among several that the parties intended to be performed.\u201d Without the necessary conditional language or explicit consequence for failure to perform, the fire insurance requirement was only a promise and did not require the literal performance demanded from an express condition precedent.<\/p>\n

Conclusion<\/strong><\/h3>\n

Those entering into agreements for construction should be vigilant about conditional contractual language\u2014especially if the conditions state a consequence for failure. Words such as \u2018until,\u2019 \u2018if,\u2019 \u2018provided\u2019 and (most obviously) \u2018as a condition precedent\u2019 are indicators of a condition precedent and will require the strict performance discussed in this article. Developers, owners, contractors and subcontractors performing work under agreements with such terms should be certain that their performance literally complies with the condition precedent to avoid the forfeiture of any rights or benefits under the agreement. Even substantial performance, as demonstrated by the subcontractor in\u00a0Schindler,<\/em>\u00a0will be insufficient to prevail on a contract claim. In certain instances, such as\u00a0Archstone<\/em>, a court may not even consider evidence as to the merits of the claim if the condition precedent has not been strictly satisfied.<\/p>\n

However, conditions precedent can be advantageous for both owners and contractors if used properly. They are ideal for situations where precise performance is critical to the success of a project, allowing the parties to delineate clearly the performance required, such as the timely and detailed submitting of change orders or the prompt notice of a potential delay. Nevertheless, if used incorrectly or\u2014worse yet\u2014inadvertently, the unintended consequences could be disastrous and often irreversible.<\/p>\n","protected":false},"excerpt":{"rendered":"

Kenneth M. Block and Joshua M. Levy | New York Law Journal | June 19, 2018 In their Construction Law column, Kenneth Block and Joshua Levy explore the differences between typical contract terms and those that rise to the level of conditions precedent, the latter requiring strict compliance to avoid forfeiture. Given the fast-paced nature… Continue reading Conditions Precedents in Construction Contracts<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,72,303],"class_list":["post-894456","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contracts-2","tag-new-york","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nConditions Precedents in Construction Contracts - 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